Price Change

What is a 'Price Change'

A price change is the difference in the cost of an asset or security from one period to another. While it can be computed for any length of time, the most commonly cited price change in the financial media is the "daily price change," which is the change in the price of a stock or security from the previous trading day's close to the current day's close. Price change over a period of time such as year-to-date or past 12 months are also commonly used time periods, and is generally computed as a percentage change.

BREAKING DOWN 'Price Change'

Percentage price change is generally the norm for computing asset performance. For shorter intraday periods, absolute price change may be used by momentum and algorithmic traders as the basis for trading and arbitrage strategies.

Price change forms one of the two elements that comprise the total returns from an investment over a period of time, the other being dividends or distributions obtained from the investment.

Price Changes and Market Performance

If a publicly traded security experiences numerous price changes in a relatively short timeframe, this could be labeled as a period of volatility. When a security’s price changes positively, with its value increasing rapidly, it might attract the attention of more investors who buy shares in the hopes of seeing higher returns. Price changes naturally can include declines where investors sell off stock, which could erase gains.

The drivers of price changes in publicly traded securities can include activities directly associated with companies. New appointments in executive leadership, the announcement of new strategies or products by companies, or positive reception of the companies’ products could lead to price changes.

For example, if a company invests considerable time and resources to create a new product line, how the product is received by its customers could affect the company’s earnings. If there is a report that the product’s sales were above target, the company’s shares may see a positive price change as investors purchase more stock in response. Conversely, if a company sees some of their products perform poorly with their customers, the shares may fall in value.

External factors such as industry shifts, government regulations, or even severe weather that affects company operations can also influence price changes as investors weigh how those elements may influence a company's’ performance in the future.

Examining a historic range of price changes can be a way to put into perspective the impact that particular events had on a company’s valuation.